SciClone Pharmaceuticals (SCLN)

SciClone Pharmaceuticals (NASDAQ: SCLN) is a profit driven,
global pharmaceutical company with a substantial international business and a product portfolio of novel therapies for cancer and infectious diseases. Our objective, which we believe we will achieve, is profitability for the full year 2009 through a
combination of international sales growth, a cost-containing clinical development strategy, and focused expense management. ZADAXIN®, our brand of thymalfasin or thymosin alpha 1 and our
primary product, is sold in over 30 countries for the treatment of the hepatitis B virus (HBV) and the hepatitis C virus (HCV), certain cancers and as a vaccine adjuvant. In addition, our DC Bead
product is awaiting approval in the Peoples Republic of China (China), for the treatment of liver cancer. Our current cash position, $6.0 million line of credit, and the profit margin from our product sales provide the
financial resources for continued growth in our international business and for development of our pipeline of phase 2 drug candidates, including: RP101 for the treatment of pancreatic cancer and SCV-07 for the treatment of HCV and for oral
mucositis.

We plan to expand our commercial operations, currently primarily located
in China, with the goal of becoming a significant pharmaceutical company in this rapidly growing pharmaceutical market. A key part of our strategy is to leverage our decade of experience in China and to grow our international business by adding
commercial stage or near term commercial stage products to our portfolio. For example, after having acquired the Chinese marketing rights to DC BeadTM for liver cancer, we are pursuing its regulatory approval and, if approved, intend to launch this product in 2009. We believe we are well-positioned to in-license additional therapeutics for our international business with a focus on
China, in part because of our opportunity to commercialize these products utilizing our well established sales and marketing organization in China.

SciClone continues its clinical development program potential with three product candidates being studied in four indications. Our latest stage opportunity is ready for phase 3 which will evaluate thymalfasin as a therapy for stage IV
melanoma. We estimate that this is a $200 million market opportunity worldwide. If the targeted patient group can be extended to the adjuvant setting through additional clinical trials, we believe the global market opportunity could increase by
approximately $500 million. We are in the process of seeking a partner for this phase 3 trial prior to initiating enrollment.

In addition
to thymalfasin, we are developing RP101 for the treatment of life-threatening diseases. We are conducting a multi-center, randomized, double-blind, placebo controlled phase 2 clinical trial using RP101 in combination with gemcitabine chemotherapy in
approximately 167 patients with unresectable stage III and IV pancreatic cancer. We announced March 9, 2009 that we completed enrollment of this trial ahead of schedule and expect to report results in the first half of 2010.

Our third product candidate, SCV-07, is being studied in two indications. In September 2008, we reported what we believe are promising results from our
proof-of-concept phase 2a clinical trial using SCV-07 as a sole agent administered to patients chronically infected with HCV. The trial was designed to evaluate the effect of SCV-07 on hepatitis C viral load, as well as on other measures of immune
response. SCV-07 demonstrated activity in some treated patients in the higher dosage groups, and the decrease in viral load in these patients was accompanied by an increase in a biomarker which is usually correlated with an immunological response
against HCV. Additionally, SCV-07 was shown to be generally safe and well-tolerated with no dose limiting toxicities or serious adverse events reported. We are planning to initiate a phase 2b trial for SCV-07 in HCV in 2009.

During the fourth quarter of 2008, SCV-07 also entered phase 2 clinical development to assess the safety and efficacy of SCV-07 for the delay to onset of
severe oral mucositis in subjects receiving chemoradiation therapy for the treatment of cancers of the head and neck. In this multi-center, randomized, double-blind, placebo-controlled dose-ranging study, we plan to enroll approximately 60 patients
and expect to complete enrollment of this trial before the end of 2009 and we expect to report results in the first half of 2010.

We manufacture ZADAXIN, RP101 and SCV-07 through third party contract manufacturers, and we conduct our
research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

We believe our cash on hand, ongoing revenue generating business operations and $6 million line of credit will be sufficient to fund our current business activities for the foreseeable future. During this period, our results may fluctuate
from quarter to quarter and we may report quarterly losses. Our ability to sustain operating profitability will be impacted by numerous factors including expansion of our sales efforts for ZADAXIN, the regulatory approval process including the
timing of United States Food and Drug Administration (FDA) or international regulatory approvals, the number, timing, costs and results of pre-clinical and clinical trials of our products, market acceptance of ZADAXIN, and
potentially of SCV-07, DC Bead, and RP101, the timing of orders for ZADAXIN from international markets, particularly China, and the acquisition of additional product rights and the funding, if any, provided as a result of corporate partnering
arrangements.

SciClone Pharmaceuticals (NASDAQ: SCLN) is a for-profit, global pharmaceutical company with a
substantial international business and a product portfolio of novel therapies for cancer and infectious diseases. Our objective, which we believe we will achieve, is sustained profitability for the full year 2009 through a combination of
international sales growth, a cost-containing clinical development strategy, and focused expense management. ZADAXIN®, our brand of thymalfasin and our primary product, is sold in over 30
countries for the treatment of the hepatitis B virus (HBV) and the hepatitis C virus (HCV), certain cancers and/or as a vaccine adjuvant. Our cash position and the profit margin on our product sales and marketing operations provide the financial
resources for continued growth in our international business and for development of our pipeline of phase 2 drug candidates, including: RP101 for the treatment of pancreatic cancer and SCV-07 for the treatment of HCV and for oral mucositis. Our
DC Bead product is awaiting approval in the Peoples Republic of China (China) for the treatment of liver cancer.

We plan to expand our commercial operations, currently primarily located in China. A key part of our strategy is to leverage our decade of experience in China and to grow our international business by adding
commercial stage or near term commercial stage products to our portfolio. For example, after acquiring the Chinese marketing rights to DC BeadTM for
liver cancer, we are pursuing its regulatory approval and, if approved, intend to launch this product in 2009. We believe we are well-positioned to in-license additional therapeutics for our international business with a focus on China, in part
because of our opportunity to develop and commercialize these products utilizing our well established sales and marketing organization in China.

SciClone continues its clinical development program potential with three product candidates being studied in four indications. Our latest stage opportunity, thymalfasin as a therapy for stage IV melanoma, is ready for phase 3 development.
We estimate that this is a $200 million market opportunity worldwide. If the targeted patient group can be extended to the adjuvant setting through additional clinical trials, we anticipate the global

market opportunity could increase by about $500 million. We are in the process of seeking a partner for this phase 3 trial prior to initiating enrollment.

In June 2007, we reported positive data from a phase 2 trial, conducted in partnership with Sigma-Tau, treating patients with stage IV
melanoma, in which we showed that thymalfasin in combination with dacarbazine (DTIC) chemotherapy and low dose interferon alpha met its primary endpoint. Further, two of the thymalfasin treated groups had an overall response rate three times higher
than stage IV melanoma patients treated with DTIC, the current standard of care, and low dose interferon alpha. In addition, survival, a key secondary endpoint of the trial, was extended by nearly 3 months. In November 2008, we reported that we
reached an agreement on Special Protocol Assessment with the U.S. Food and Drug Administration (FDA) on the design of a phase 3 registration trial for thymalfasin as a potential treatment for stage IV melanoma that adequately addresses the
objectives necessary to support a regulatory submission.

In addition to thymalfasin, we are developing RP101 and SCV-07 for the treatment
of life-threatening diseases. We are conducting a multi-center, randomized, double-blinded, placebo controlled phase 2 clinical trial using RP101 in combination with gemcitabine chemotherapy in approximately 153 patients with unresectable stage III
and IV pancreatic cancer. We announced March 9, 2009, that we completed enrollment in this trial ahead of schedule and that we expect to report results in the first half of 2010.

In September 2008, we reported what we believe are promising results from our proof-of-concept phase 2a clinical trial using SCV-07 as a sole agent
administered to patients chronically infected with HCV. The trial was designed to evaluate the effect of SCV-07 on hepatitis C viral load, as well as on other measures of immune response. SCV-07 demonstrated activity in some treated patients in the
higher dosage groups, and the decrease in viral load in these patients was accompanied by an increase in a biomarker which is usually correlated with an immunological response against HCV. Additionally, SCV-07 was shown to be generally safe and
well-tolerated with no dose limiting toxicities or serious adverse events reported. We are planning to initiate a phase 2b trial for SCV-07 in HCV in 2009.

During the fourth quarter of 2008, SCV-07 also entered phase 2 clinical development to assess the safety and efficacy of SCV-07 for the delay to onset of severe oral mucositis in subjects receiving chemoradiation
therapy for the treatment of cancers of the head and neck. In this multi-center, randomized, double-blind, placebo-controlled dose-ranging study, we plan to enroll approximately 60 patients and expect to complete enrollment of this trial before the
end of 2009.

SciClone Pharmaceuticals, Inc. was organized in 1990 as a California corporation and reincorporated in Delaware in 2003. Our
corporate headquarters are located in Foster City, California. For information about our revenues from external customers, measures of our profit and loss, our total assets and other financial matters, you should read our Consolidated Financial
Statements provided in Part II, Item 8 of this Form 10-K.

OVERVIEW

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;line-height:95%; vertical-align:top">SciClone Pharmaceuticals (NASDAQ: SCLN) is a for-profit, global pharmaceutical company with asubstantial international business and a product portfolio of novel therapies for cancer and infectious diseases. Our objective, which we believe we will achieve, is sustained profitability for the full year 2009 through a combination ofinternational sales growth, a cost-containing clinical development strategy, and focused expense management. ZADAXIN®, our brand of thymalfasin and our primary product, is sold in over 30countries for the treatment of the hepatitis B virus (HBV) and the hepatitis C virus (HCV), certain cancers and/or as a vaccine adjuvant. Our cash position and the profit margin on our product sales and marketing operations provide the financialresources for continued growth in our international business and for development of our pipeline of phase 2 drug candidates, including: RP101 for the treatment of pancreatic cancer and SCV-07 for the treatment of HCV and for oral mucositis. OurDC Bead product is awaiting approval in the Peoples Republic of China (China) for the treatment of liver cancer.

FACE="Times New Roman" SIZE="2">We plan to expand our commercial operations, currently primarily located in China. A key part of our strategy is to leverage our decade of experience in China and to grow our international business by addingcommercial stage or near term commercial stage products to our portfolio. For example, after acquiring the Chinese marketing rights to DC BeadTM forliver cancer, we are pursuing its regulatory approval and, if approved, intend to launch this product in 2009. We believe we are well-positioned to in-license additional therapeutics for our international business with a focus on China, in partbecause of our opportunity to develop and commercialize these products utilizing our well established sales and marketing organization in China.

SIZE="2">SciClone continues its clinical development program potential with three product candidates being studied in four indications. Our latest stage opportunity, thymalfasin as a therapy for stage IV melanoma, is ready for phase 3 development.We estimate that this is a $200 million market opportunity worldwide. If the targeted patient group can be extended to the adjuvant setting through additional clinical trials, we anticipate the global

market opportunity could increase by about $500 million. We are in the process of seeking a partner for this phase 3 trial prior to initiating enrollment.

In June 2007, we reported positive data from a phase 2 trial, conducted in partnership with Sigma-Tau, treating patients with stage IVmelanoma, in which we showed that thymalfasin in combination with dacarbazine (DTIC) chemotherapy and low dose interferon alpha met its primary endpoint. Further, two of the thymalfasin treated groups had an overall response rate three times higherthan stage IV melanoma patients treated with DTIC, the current standard of care, and low dose interferon alpha. In addition, survival, a key secondary endpoint of the trial, was extended by nearly 3 months. In November 2008, we reported that wereached an agreement on Special Protocol Assessment with the U.S. Food and Drug Administration (FDA) on the design of a phase 3 registration trial for thymalfasin as a potential treatment for stage IV melanoma that adequately addresses theobjectives necessary to support a regulatory submission.

In addition to thymalfasin, we are developing RP101 and SCV-07 for the treatmentof life-threatening diseases. We are conducting a multi-center, randomized, double-blinded, placebo controlled phase 2 clinical trial using RP101 in combination with gemcitabine chemotherapy in approximately 153 patients with unresectable stage IIIand IV pancreatic cancer. We announced March 9, 2009, that we completed enrollment in this trial ahead of schedule and that we expect to report results in the first half of 2010.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">In September 2008, we reported what we believe are promising results from our proof-of-concept phase 2a clinical trial using SCV-07 as a sole agentadministered to patients chronically infected with HCV. The trial was designed to evaluate the effect of SCV-07 on hepatitis C viral load, as well as on other measures of immune response. SCV-07 demonstrated activity in some treated patients in thehigher dosage groups, and the decrease in viral load in these patients was accompanied by an increase in a biomarker which is usually correlated with an immunological response against HCV. Additionally, SCV-07 was shown to be generally safe andwell-tolerated with no dose limiting toxicities or serious adverse events reported. We are planning to initiate a phase 2b trial for SCV-07 in HCV in 2009.

FACE="Times New Roman" SIZE="2">During the fourth quarter of 2008, SCV-07 also entered phase 2 clinical development to assess the safety and efficacy of SCV-07 for the delay to onset of severe oral mucositis in subjects receiving chemoradiationtherapy for the treatment of cancers of the head and neck. In this multi-center, randomized, double-blind, placebo-controlled dose-ranging study, we plan to enroll approximately 60 patients and expect to complete enrollment of this trial before theend of 2009.

SciClone Pharmaceuticals, Inc. was organized in 1990 as a California corporation and reincorporated in Delaware in 2003. Ourcorporate headquarters are located in Foster City, California. For information about our revenues from external customers, measures of our profit and loss, our total assets and other financial matters, you should read our Consolidated FinancialStatements provided in Part II, Item 8 of this Form 10-K.

Overview

SciClone Pharmaceuticals (NASDAQ: SCLN) is a for-profit, global pharmaceutical company with a substantial international business and a product portfolio of novel therapies for cancer and infectious diseases. Our
objective, which we believe we will achieve, is sustained profitability for the full year 2009 through a combination of international sales growth, a cost-containing clinical development strategy, and focused expense management. ZADAXIN®, our brand of thymalfasin and our primary product, is sold in over 30 countries for the treatment of the hepatitis B virus (HBV) and the hepatitis C virus (HCV), certain cancers and as a
vaccine adjuvant. Our cash position and the profit margin on our product sales and marketing operations provide the financial resources for continued growth in our international business and for development of our pipeline of phase 2 drug
candidates, including: RP101 for the treatment of pancreatic cancer and SCV-07 for the treatment of HCV and for oral mucositis. Our DC Bead product is awaiting approval in the Peoples Republic of China (China), for the treatment of liver
cancer.

We plan to expand our commercial operations, currently primarily located in
China, with the goal of becoming a significant pharmaceutical company in this rapidly growing market. A key part of our strategy is to leverage our decade of experience in China and to grow our international business by adding commercial stage or
near term commercial stage products to our portfolio. For example, after acquiring the Chinese marketing rights to DC BeadTM for liver cancer, we
are pursuing its regulatory approval and, if approved, intend to launch this product in 2009. We believe we are well-positioned to in-license additional therapeutics for our international business with a focus on China, in part because of our
opportunity to develop and commercialize these products utilizing our well established sales and marketing organization in China.

For the
years ended December 31, 2008, 2007, and 2006 product sales were $54,108,000, $37,038,000 and $32,433,000, respectively. Our revenue growth was attributable to further market penetration in China related to ZADAXIN. For the years ended
December 31, 2008, 2007, and 2006 product sales to China were $50,724,000, $34,240,000 and $29,722,000, respectively.

SciClone
continues its clinical development program potential with three product candidates being studied in four indications. Our latest stage opportunity is ready for phase 3 which will evaluate thymalfasin as a therapy for stage IV melanoma. We estimate
that this is a $200 million market opportunity worldwide. If the targeted patient group can be extended to the adjuvant setting through additional clinical trials, we believe the global market opportunity could increase by about $500 million. We are
in the process of seeking a partner for this phase 3 trial prior to initiating enrollment.

In June 2007, we reported positive data from a
phase 2 trial, conducted in partnership with Sigma-Tau, treating patients with stage IV melanoma in which we showed that thymalfasin in combination with dacarbazine (DTIC) chemotherapy and low dose interferon alpha met its primary endpoint. Further,
two of the thymalfasin treated groups had an overall response rate three times higher than stage IV melanoma patients treated with DTIC, the current standard of care, and low dose interferon alpha. In addition, survival, a key secondary endpoint of
the trial, was extended by nearly 3 months. In November 2008, we reported that we reached an agreement on Special Protocol Assessment with the U.S. Food and Drug Administration (FDA) on the design of a phase 3 registration trial for thymalfasin as a
potential treatment for stage IV melanoma that adequately addresses the objectives necessary to support a regulatory submission.

In addition to thymalfasin, we are developing RP101 and SCV-07 for the treatment of life-threatening
diseases. We are conducting a multi-center, randomized, double-blinded, placebo controlled phase 2 clinical trial using RP101 in combination with gemcitabine chemotherapy in approximately 153 patients with unresectable stage III and IV pancreatic
cancer. We announced March 9, 2009 that we completed enrollment of this trial ahead of schedule and expect to report results in the first half of 2010.

In September 2008, we reported what we believe are promising results from our proof-of-concept phase 2a clinical trial using SCV-07 as a sole agent administered to patients chronically infected with HCV. The trial was
designed to evaluate the effect of SCV-07 on hepatitis C viral load, as well as on other measures of immune response. SCV-07 demonstrated activity in some treated patients in the higher dosage groups, and the decrease in viral load in these patients
was accompanied by an increase in a biomarker which is usually correlated with an immunological response against HCV. Additionally, SCV-07 was shown to be generally safe and well-tolerated with no dose limiting toxicities or serious adverse events
reported. We are planning to initiate a phase 2b trial for SCV-07 in HCV in 2009.

During the fourth quarter of 2008, SCV-07 also entered
phase 2 clinical development to assess the safety and efficacy of SCV-07 for the delay to onset of severe oral mucositis in subjects receiving chemoradiation therapy for the treatment of cancers of the head and neck. In this multi-center,
randomized, double-blind, placebo-controlled dose-ranging study, we plan to enroll approximately 60 patients and expect to complete enrollment of this trial before the end of 2009.

We manufacture ZADAXIN, RP101 and SCV-07 through third party contract manufacturers, and we conduct our research and development efforts principally
through arrangements with clinical research sites, contract research organizations and universities.

We believe our cash on hand and
ongoing business operations and $6 million line of credit will be sufficient to fund current business activities for the foreseeable future. During this period, we may report quarterly losses. Our ability to sustain operating profitability will be
impacted by numerous factors including expansion of our sales efforts for ZADAXIN, the regulatory approval process including the timing of FDA or international regulatory approvals, the number, timing, costs and results of pre-clinical and clinical
trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, the timing of orders for ZADAXIN from international markets, particularly China, and the acquisition of additional product rights and the funding,
if any, provided as a result of corporate partnering arrangements.

Overview

FACE="Times New Roman" SIZE="2">SciClone Pharmaceuticals (NASDAQ: SCLN) is a for-profit, global pharmaceutical company with a substantial international business and a product portfolio of novel therapies for cancer and infectious diseases. Ourobjective, which we believe we will achieve, is sustained profitability for the full year 2009 through a combination of international sales growth, a cost-containing clinical development strategy, and focused expense management. ZADAXINFACE="Times New Roman" SIZE="1">®, our brand of thymalfasin and our primary product, is sold in over 30 countries for the treatment of the hepatitis B virus (HBV) and the hepatitis C virus (HCV), certain cancers and as avaccine adjuvant. Our cash position and the profit margin on our product sales and marketing operations provide the financial resources for continued growth in our international business and for development of our pipeline of phase 2 drugcandidates, including: RP101 for the treatment of pancreatic cancer and SCV-07 for the treatment of HCV and for oral mucositis. Our DC Bead product is awaiting approval in the Peoples Republic of China (China), for the treatment of livercancer.

We plan to expand our commercial operations, currently primarily located inChina, with the goal of becoming a significant pharmaceutical company in this rapidly growing market. A key part of our strategy is to leverage our decade of experience in China and to grow our international business by adding commercial stage ornear term commercial stage products to our portfolio. For example, after acquiring the Chinese marketing rights to DC BeadTM for liver cancer, weare pursuing its regulatory approval and, if approved, intend to launch this product in 2009. We believe we are well-positioned to in-license additional therapeutics for our international business with a focus on China, in part because of ouropportunity to develop and commercialize these products utilizing our well established sales and marketing organization in China.

For theyears ended December 31, 2008, 2007, and 2006 product sales were $54,108,000, $37,038,000 and $32,433,000, respectively. Our revenue growth was attributable to further market penetration in China related to ZADAXIN. For the years endedDecember 31, 2008, 2007, and 2006 product sales to China were $50,724,000, $34,240,000 and $29,722,000, respectively.

SciClonecontinues its clinical development program potential with three product candidates being studied in four indications. Our latest stage opportunity is ready for phase 3 which will evaluate thymalfasin as a therapy for stage IV melanoma. We estimatethat this is a $200 million market opportunity worldwide. If the targeted patient group can be extended to the adjuvant setting through additional clinical trials, we believe the global market opportunity could increase by about $500 million. We arein the process of seeking a partner for this phase 3 trial prior to initiating enrollment.

In June 2007, we reported positive data from aphase 2 trial, conducted in partnership with Sigma-Tau, treating patients with stage IV melanoma in which we showed that thymalfasin in combination with dacarbazine (DTIC) chemotherapy and low dose interferon alpha met its primary endpoint. Further,two of the thymalfasin treated groups had an overall response rate three times higher than stage IV melanoma patients treated with DTIC, the current standard of care, and low dose interferon alpha. In addition, survival, a key secondary endpoint ofthe trial, was extended by nearly 3 months. In November 2008, we reported that we reached an agreement on Special Protocol Assessment with the U.S. Food and Drug Administration (FDA) on the design of a phase 3 registration trial for thymalfasin as apotential treatment for stage IV melanoma that adequately addresses the objectives necessary to support a regulatory submission.

In addition to thymalfasin, we are developing RP101 and SCV-07 for the treatment of life-threateningdiseases. We are conducting a multi-center, randomized, double-blinded, placebo controlled phase 2 clinical trial using RP101 in combination with gemcitabine chemotherapy in approximately 153 patients with unresectable stage III and IV pancreaticcancer. We announced March 9, 2009 that we completed enrollment of this trial ahead of schedule and expect to report results in the first half of 2010.

FACE="Times New Roman" SIZE="2">In September 2008, we reported what we believe are promising results from our proof-of-concept phase 2a clinical trial using SCV-07 as a sole agent administered to patients chronically infected with HCV. The trial wasdesigned to evaluate the effect of SCV-07 on hepatitis C viral load, as well as on other measures of immune response. SCV-07 demonstrated activity in some treated patients in the higher dosage groups, and the decrease in viral load in these patientswas accompanied by an increase in a biomarker which is usually correlated with an immunological response against HCV. Additionally, SCV-07 was shown to be generally safe and well-tolerated with no dose limiting toxicities or serious adverse eventsreported. We are planning to initiate a phase 2b trial for SCV-07 in HCV in 2009.

During the fourth quarter of 2008, SCV-07 also enteredphase 2 clinical development to assess the safety and efficacy of SCV-07 for the delay to onset of severe oral mucositis in subjects receiving chemoradiation therapy for the treatment of cancers of the head and neck. In this multi-center,randomized, double-blind, placebo-controlled dose-ranging study, we plan to enroll approximately 60 patients and expect to complete enrollment of this trial before the end of 2009.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We manufacture ZADAXIN, RP101 and SCV-07 through third party contract manufacturers, and we conduct our research and development efforts principallythrough arrangements with clinical research sites, contract research organizations and universities.

We believe our cash on hand andongoing business operations and $6 million line of credit will be sufficient to fund current business activities for the foreseeable future. During this period, we may report quarterly losses. Our ability to sustain operating profitability will beimpacted by numerous factors including expansion of our sales efforts for ZADAXIN, the regulatory approval process including the timing of FDA or international regulatory approvals, the number, timing, costs and results of pre-clinical and clinicaltrials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, the timing of orders for ZADAXIN from international markets, particularly China, and the acquisition of additional product rights and the funding,if any, provided as a result of corporate partnering arrangements.

SciClone Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the development and
commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in the areas of cancer and viral infectious diseases, and to develop them for commercialization in the major pharmaceutical markets
with a particular focus on the Peoples Republic of China (China), one of the worlds fastest growing pharmaceutical markets. ZADAXIN®, our brand of thymalfasin, is
one of the largest imported drugs, as measured by revenue, in China today, and currently is in late-stage clinical development for the treatment of hepatitis C virus (HCV) in Europe. Our proprietary in-licensed compound RP101 entered phase 2
clinical development for the treatment of pancreatic cancer in combination with gemcitabine in January 2008. Our proprietary in-licensed compound SCV-07 entered phase 2 clinical development for viral infectious disease in June 2007. We also
submitted a regulatory application to the Chinese State Food and Drug Administration (SFDA) in December 2006 related to DC BeadTM, a product for the
treatment of liver cancer, or hepatocellular carcinoma (HCC), for which we obtained Chinese marketing rights in June 2006 from Biocompatibles UK Ltd., a UK-based company.

In addition to our current product portfolio, we believe we are well-positioned to in-license additional therapeutics for both China and the significantly larger U.S. and European markets, in part because of our
opportunity to develop and commercialize such products in China. Also, we intend to use our clinical work in China to support and accelerate regulatory applications in the United States and Europe.

Our European partner, Sigma-Tau, recently completed a triple therapy combination (ZADAXIN plus pegylated interferon alpha and ribavirin) hepatitis C
clinical trial in Europe. On November 5, 2008, we announced the top-line results from this large, randomized, phase 3 clinical trial evaluating thymalfasin in combination with pegylated interferon alpha-2a (peg-IFN-2a) and ribavirin (RBV) as a
treatment for patients with hepatitis C virus (HCV) who have not responded to prior therapy consisting of peg-IFN and RBV alone (current standard of care). The thymalfasin treated group did not achieve statistical significance for the primary end
point of sustained virological response (SVR) as assessed in the primary analysis population, i.e. the intent-to-treat population. In the prospectively defined secondary population of patients who completed the full course of 48 weeks of treatment
with thymalfasin in addition to peg-IFN-2a and RBV (Completer Population), the primary endpoint was achieved with statistical significance. We plan to further analyze the data in coming weeks and to present a full report at an upcoming clinical
conference.

In September 2008, we reported what we believe are promising results from our proof-of-concept phase 2A clinical trial using
SCV-07 as a sole agent administered to patients chronically infected with HCV. The trial was designed to evaluate the effect of SCV-07 on hepatitis C viral load, as well as on other measures of immune response. SCV-07 demonstrated activity in some
treated patients in the higher dosage groups, and the decrease in viral load in these patients was accompanied by an increase in an immunological biomarker which is usually correlated with response against HCV. Additionally, SCV-07 was shown to be
generally safe and well-tolerated with no dose limiting toxicities or serious adverse events reported. During the fourth quarter of our fiscal 2008, we plan to discuss with the FDA the initiation of a follow-up SCV-07 phase 2B trial.

In June 2007, we reported positive data from a phase 2 trial, also conducted by Sigma-Tau, treating patients with stage IV melanoma indicating that
thymalfasin in combination with dacarbazine (DTIC) chemotherapy and low dose interferon alpha met its primary endpoint by reaching the tumor response rate required to reject the null hypothesis. In fact, two of the thymalfasin treated groups had a
tripled overall response rate compared to stage IV melanoma patients treated with DTIC, the current standard of care, and low dose interferon alpha. In addition, survival, a key secondary endpoint, was

extended by nearly 3 months. We and Sigma-Tau are planning the design of a phase 3 melanoma trial and our regulatory strategy including a Special Protocol
Assessment (SPA) to be filed with the FDA. Thymalfasin phase 3 clinical development and commercialization plans for HCV and melanoma have potentially significantly different timelines, costs, and sales potential, and the markets for these two
products differ in terms of competitive products and other factors. Consequently, before proceeding with a further melanoma trial, we expect that we and Sigma-Tau will review the recently announced results for the HCV clinical trial in order to
determine the next steps for an optimal thymalfasin development program.

We manufacture ZADAXIN for sale and for our clinical trials
through third party contract manufacturers, and we conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

For the three months ended September 30, 2008 and 2007, product sales were $14,328,000 and $9,421,000, respectively. For the nine months ended
September 30, 2008 and 2007, product sales were $38,796,000 and $27,020,000, respectively. Our revenue growth was attributable to further market penetration in China related to ZADAXIN. For the three months ended September 30, 2008 and
2007, product sales in China were $13,637,000 and $8,624,000, respectively. For the nine months ended September 30, 2008 and 2007 product sales in China were $36,696,000 and $24,867,000, respectively.

For the overall consolidated Company, primarily due to the level of research and development activities, we expect a net loss and a reduction in cash,
cash equivalents and short-term investments for 2008. However, we believe our cash on hand and ongoing business operations will be sufficient to fund current business activities for the foreseeable future. During this period, we may report quarterly
losses. Our ability to sustain operating profitability will be impacted by numerous factors including expansion of sales of ZADAXIN, the regulatory approval process including the timing of FDA or international regulatory approvals, the number,
timing, costs and results of pre-clinical and clinical trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, the timing of orders for ZADAXIN from international markets, particularly China, and the
acquisition of additional product rights and the funding, if any, provided as a result of corporate partnering arrangements. Although we believe our cash on hand and ongoing business operations will be sufficient to fund current business activities
for the foreseeable future, we are considering raising additional funding in the fourth quarter of 2008 and 2009 to provide additional flexibility in financing our operations, including anticipated clinical trials. We are exploring various
alternatives for financing in addition to sales of equity of SciClone, including a line of credit, debt financing and financing of our operations in the Peoples Republic of China, either through debt, equity or joint venture transactions, but
we have not determined the timing or structure of any transaction.

SciClone Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the development and
commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in the areas of cancer and viral infectious diseases, and to develop them for commercialization in the major pharmaceutical markets
with a particular focus on the Peoples Republic of China (China), one of the worlds fastest growing pharmaceutical markets. ZADAXIN®, our brand of thymalfasin, is
one of the largest imported drugs, as measured by revenue, in China today, and currently is in late-stage clinical development for the treatment of hepatitis C virus (HCV) in Europe. Our proprietary in-licensed compound RP101 entered phase 2
clinical development for the treatment of pancreatic cancer in combination with gemcitabine in January 2008. Our proprietary in-licensed compound SCV-07 entered phase 2 clinical development for viral infectious disease in June 2007. We also
submitted a regulatory application to the Chinese State Food and Drug Administration (SFDA) in December 2006 related to DC BeadTM, a product for the
treatment of liver cancer, or hepatocellular carcinoma (HCC), for which we obtained Chinese marketing rights in June 2006 from Biocompatibles UK Ltd., a UK-based company.

In addition to our current product portfolio, we believe we are well-positioned to in-license additional therapeutics for both China and the significantly larger U.S. and European markets, in part because of our
opportunity to develop and commercialize such products in China. Also, we intend to use our clinical work in China to support and accelerate regulatory applications in the United States and Europe.

Our European partner, Sigma-Tau, is conducting a triple therapy combination (ZADAXIN plus pegylated interferon alpha and ribavirin) hepatitis C clinical
trial in Europe. In a press release dated February 11, 2008, we reported what we believe were promising interim blinded results and in a press release dated June 26, 2008, we reported that this trial has been successfully completed and
that we expect the unblinded results of the trial to be released in the fourth quarter of 2008.

In June 2007, we reported positive data
from a phase 2 trial, also conducted by Sigma-Tau, treating patients with stage IV malignant melanoma indicating that thymalfasin in combination with dacarbazine (DTIC) chemotherapy and low dose interferon alpha met its primary endpoint by reaching
the tumor response rate required to reject the null hypothesis. In fact, two of the thymalfasin treated groups had a tripled overall response rate compared to malignant melanoma patients treated with DTIC, the current standard of care, and low dose
interferon alpha. In addition, survival, a key secondary endpoint, was extended by nearly 3 months. We and Sigma-Tau are planning the design of a phase 3 melanoma trial and our regulatory strategy including a Special Protocol Assessment (SPA) to be
filed with the FDA. Thymalfasin phase 3 clinical development and commercialization plans for HCV and melanoma have potentially significantly different timelines, costs, and sales potential, and the markets for these two products differ in terms of
competitive products and other factors. Consequently, before proceeding with a further melanoma trial, we expect that we and Sigma-Tau will review the final results for the current HCV clinical trial anticipated in the fourth quarter of 2008 in
order to determine the next steps for an optimal thymalfasin development program.

We manufacture ZADAXIN for sale and for our clinical
trials through third party contract manufacturers, and we conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

As of June 30, 2008, we have an accumulated deficit of approximately $174,480,000. At least over the next few years, we expect net losses due to
increased operating expenses as we expand our research and development and clinical testing efforts and our sales and marketing capabilities. Our ability to achieve and sustain operating profitability is dependent on

expansion of sales of ZADAXIN and securing regulatory approval for DC Bead in China, the execution and successful completion of ZADAXIN, SCV-07, and RP101
clinical trials and securing regulatory approvals for these products in the major pharmaceutical markets of the United States and Europe. If regulatory approval is secured in those territories, our ability to achieve and sustain operating
profitability will depend on the successful commercialization and marketing of these products. Clinical development involves numerous risks and uncertainties and, in addition to our successes, we have experienced setbacks in clinical development in
the past. In particular, in December 2005 and June 2006, we reported results from our two U.S. phase 3 trials evaluating the double therapy combination of ZADAXIN and pegylated interferon alpha to treat HCV patients who had failed previous therapy.
The results from these trials did not demonstrate that ZADAXIN in combination with pegylated interferon alpha provides a statistically significant clinical benefit when compared with pegylated interferon alpha alone. In addition, other factors may
also impact our ability to achieve and sustain operating profitability, including the pricing of ZADAXIN and its manufacturing and marketing costs, our ability to compete in pharmaceutical markets, the cost of product development and
commercialization programs including SCV-07, DC Bead, and RP101, the timing and costs of acquiring rights to additional drugs, our ability to fund our operations and the entrance into and extension of agreements for product development and
commercialization, where appropriate.

For the six months ended June 30, 2008 and 2007, product sales in China were $23,058,000 and
$16,243,000, respectively. We expect net sales to increase for the remainder of fiscal 2008, compared to the same period in 2007. For the overall consolidated Company, primarily due to the level of research and development activities and other
operations, we expect a net loss and a reduction in cash, cash equivalents and short-term investments for 2008. We are considering raising additional funding in 2008 to finance our operations, including anticipated clinical trials. We are exploring
various alternatives for financing in addition to sales of equity of SciClone, including a line of credit, debt financing and financing of our Chinese operations either through debt, equity or joint venture transactions, but we have not determined
the timing or structure of any transaction.

Our operating results may fluctuate from quarter to quarter and these fluctuations may be
substantial as a result of, among other factors, the number, timing, costs and results of pre-clinical and clinical trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, and the timing of orders for
ZADAXIN from international markets, particularly China, the regulatory approval process, the timing of FDA or international regulatory approvals, and the acquisition of additional product rights and the funding, if any, provided as a result of
corporate partnering arrangements.

SciClone Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the development and
commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in the areas of cancer and viral infectious diseases, and to develop them for commercialization in the major pharmaceutical markets
with a particular focus on the Peoples Republic of China (China), one of the worlds fastest growing pharmaceutical markets. ZADAXIN®, our brand of thymalfasin, is
one of the largest imported drugs, as measured by revenue, in China today, and currently is in late-stage clinical development for the treatment of hepatitis C virus (HCV) in Europe. Our proprietary in-licensed compound RP101 entered phase 2
clinical development for the treatment of pancreatic cancer in combination with gemcitabine in January 2008. Our proprietary in-licensed compound SCV-07 entered phase 2 clinical development for viral infectious disease in June 2007. We also
submitted a regulatory application to the Chinese State Food and Drug Administration (SFDA) in December 2006 related to DC BeadTM, a product for the
treatment of liver cancer, or hepatocellular carcinoma (HCC), for which we obtained Chinese marketing rights in June 2006 from Biocompatibles UK Ltd., a UK-based company.

In addition to our current product portfolio, we believe we are well-positioned to in-license additional therapeutics for both China and the significantly larger U.S. and European markets, in part because of our
opportunity to develop and commercialize such products in China. Also, we intend to use our clinical work in China to support and accelerate regulatory applications in the United States and Europe.

Our European partner, Sigma-Tau, is conducting a triple therapy combination (ZADAXIN plus pegylated interferon alpha and ribavirin) hepatitis C clinical
trial in Europe. In a press release dated February 11, 2008, we reported promising interim blinded results indicating thymalfasin may increase sustained viral response (SVR) rates for HCV non-responder patients. We expect the results of the
trial in the third quarter of 2008.

In June 2007, we reported positive survival data from a phase 2 trial, also conducted by Sigma-Tau,
treating patients with stage IV malignant melanoma indicating that thymalfasin in combination with dacarbazine (DTIC) chemotherapy tripled the overall response rate and extended overall survival by nearly 3 months compared to malignant melanoma
patients treated with DTIC, the current standard of care, and low dose interferon alpha. In collaboration with Sigma-Tau, in October 2007, we shared the melanoma clinical data with and received approval from, the United States Federal Food and Drug
Administration (FDA) to initiate phase 3 registration trials. We and Sigma-Tau are planning the design of a phase 3 melanoma trial and our regulatory strategy including a Special Protocol Assessment (SPA) to be filed with the FDA. Thymalfasin phase
3 clinical development and commercialization plans for HCV and melanoma have potentially significantly different timelines, costs, and sizes of prospective addressable markets, and the markets for these two products differ in terms of competitive
products and other factors. Consequently, before proceeding with a further melanoma trial, we and Sigma-Tau will review the final results for the current HCV clinical trial anticipated in the third quarter of 2008 in order to determine the next
steps for an optimal thymalfasin development program.

We manufacture ZADAXIN for sale and for our clinical trials, through third party
contract manufacturers, and we conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

As of March 31, 2008, we have an accumulated deficit of approximately $174,161,000. At least over
the next few years, we expect net losses due to increased operating expenses as we expand our research and development and clinical testing efforts and our sales and marketing capabilities. Our ability to achieve and sustain operating profitability
is dependent on expansion of sales of ZADAXIN and securing regulatory approval for DC Bead in China, the execution and successful completion of ZADAXIN, SCV-07, and RP101 clinical trials and securing regulatory approvals for these products in the
major pharmaceutical markets of the United States and Europe. If regulatory approval is secured in those territories, our ability to achieve and sustain operating profitability will depend on the successful commercialization and marketing of these
products. Clinical development involves numerous risks and uncertainties and, in addition to our successes, we have experienced setbacks in clinical development in the past. In particular, in December 2005 and June 2006, we reported results from our
two U.S. phase 3 trials evaluating the double therapy combination of ZADAXIN and pegylated interferon alpha to treat HCV patients who had failed previous therapy. The results from these trials did not demonstrate that ZADAXIN in combination with
pegylated interferon alpha provides a statistically significant clinical benefit when compared with pegylated interferon alpha alone. In addition, other factors may also impact our ability to achieve and sustain operating profitability, including
the pricing of ZADAXIN and its manufacturing and marketing costs, our ability to compete in pharmaceutical markets, the cost of product development and commercialization programs including SCV-07, DC Bead, and RP101, the timing and costs of
acquiring rights to additional drugs, our ability to fund our operations and the entrance into and extension of agreements for product development and commercialization, where appropriate.

For the three months ended March 31, 2008 and 2007, product sales in China were $9,990,000 and $7,918,000, respectively. We expect net sales to
increase in 2008 due to increased sales in China. For the overall consolidated Company, primarily due to the level of research and development activities and other operations, we expect a net loss and a reduction in cash, cash equivalents and
short-term investments for 2008. We are considering raising additional capital in 2008 to fund our operations, including anticipated clinical trials. We are exploring various alternatives for financing in addition to sales of equity of SciClone,
including a line of credit, debt financing and financing of our Chinese operations either through debt, equity or joint venture transactions, but we have not determined the timing or structure of any transaction.

Our operating results may fluctuate from quarter to quarter and these fluctuations may be substantial as a result of, among other factors, the number,
timing, costs and results of pre-clinical and clinical trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, and the timing of orders for ZADAXIN from international markets, particularly China, the
regulatory approval process, the timing of FDA or international regulatory approvals, and the acquisition of additional product rights and the funding, if any, provided as a result of corporate partnering arrangements.

SciClone Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the development and commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in the
areas of cancer and viral infectious diseases, and to develop them for commercialization in the major pharmaceutical markets with a particular focus on China, one of the worlds fastest growing pharmaceutical markets. ZADAXIN®, our brand of thymalfasin, is one of the largest imported drugs, as measured by revenue, in China today, and currently is in late-stage clinical development for the treatment of malignant
melanoma and hepatitis C virus (HCV). Our proprietary in-licensed compound SCV-07 entered phase 2 clinical development for viral infectious disease in June 2007. We also submitted a regulatory application to the Chinese State Food and Drug
Administration (SFDA) in December 2006 related to DC Bead, a product for the treatment of liver cancer, or hepatocellular carcinoma (HCC), for which we obtained Chinese marketing rights in June 2006.

On April 26, 2007, we announced that we had acquired the exclusive rights in the United States and Canada to develop and commercialize RP101, a
clinical-stage compound for the treatment of cancer. Under the terms of the agreements with Resistys, Inc., a wholly-owned subsidiary of Avantogen Oncology, Inc., and with RESprotect GmbH, we paid approximately $1,700,000 in upfront fees, and in the
first quarter of 2008 a $1,320,000 milestone payment upon dosage of the first patient in a phase 2 clinical trial. In addition, we may be obligated to pay post phase 3 success-based regulatory and commercial payments up to $22,000,000, and royalties
on future sales. We intend to initially develop RP101 for the treatment of pancreatic cancer in a combination therapy with gemcitabine, the standard of care for pancreatic cancer therapy.

In addition to our current product portfolio, we believe we are well-positioned to in-license additional therapeutics for both China and the
significantly larger U.S. and European markets, in part because of our opportunity to develop and commercialize such products in China. Also, we intend to use our clinical work in China to support and accelerate regulatory applications in the United
States and Europe.

Our European partner, Sigma-Tau, is conducting a triple therapy combination (ZADAXIN plus pegylated interferon alpha
and ribavirin) hepatitis C clinical trial in Europe. In a press release dated February 11, 2008, we reported promising interim blinded results indicating thymalfasin may increase sustained viral response (SVR) rates for HCV non-responder
patients. We expect the results of the trial in the third quarter of 2008.

In June 2007, we reported positive survival data from a phase 2
trial, also conducted by Sigma-Tau, treating patients with stage IV malignant melanoma indicating that thymalfasin in combination with dacarbazine (DTIC) chemotherapy tripled the overall response rate and extended overall survival by nearly 3 months
compared to malignant melanoma patients treated with DTIC, the current standard of care, and interferon alpha. In collaboration with Sigma-Tau, in October 2007, we shared the melanoma clinical data with and received approval from, the United States
Federal Food and Drug Administration (FDA) to initiate phase 3 registration trials. We and Sigma-Tau are planning the design of a phase 3 melanoma trial and our regulatory strategy including a Special Protocol Assessment (SPA) to be filed with the
FDA. Thymalfasin phase 3 clinical development and commercialization plans for HCV and melanoma have potentially significantly different timelines, costs, and sizes of prospective addressable markets, and the markets for these two products differ in
terms of competitive products and other factors. Consequently, before proceeding with a further melanoma trial,

we and Sigma-Tau will review the final results for the current HCV clinical trial anticipated in the third quarter of 2008 in order to determine the next
steps for an optimal thymalfasin development program for the HCV and malignant melanoma indications.

We manufacture ZADAXIN for sale and
for our clinical trials, through third party contract manufacturers, and we conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

As of December 31, 2007, we have an accumulated deficit of approximately $169,000,000. At least over the next few years, we expect net losses due to
increased operating expenses as we expand our research and development and clinical testing efforts and our sales and marketing capabilities. Our ability to achieve and sustain operating profitability is dependent on expansion of sales of ZADAXIN
and securing regulatory approval for DC Bead in China, the execution and successful completion of ZADAXIN, SCV-07, and RP101 clinical trials and securing regulatory approvals for these products in the major pharmaceutical markets of the United
States, Europe and Japan. If regulatory approval is secured in those territories, our ability to achieve and sustain operating profitability will depend on the successful commercialization and marketing of these products. Clinical development
involves numerous risks and uncertainties and, in addition to our successes, we have experienced setbacks in clinical development in the past. In particular, in December 2005 and June 2006, we reported results from our two U.S. phase 3 trials
evaluating the double therapy combination of ZADAXIN and pegylated interferon alpha to treat HCV patients who had failed previous therapy. The results from these trials did not demonstrate that ZADAXIN in combination with pegylated interferon alpha
provides a statistically significant clinical benefit when compared with pegylated interferon alpha alone. In addition, other factors may also impact our ability to achieve and sustain operating profitability, including the pricing of ZADAXIN and
its manufacturing and marketing costs, our ability to compete in pharmaceutical markets, the cost of product development and commercialization programs including SCV-07, DC Bead, and RP101, the timing and costs of acquiring rights to additional
drugs, our ability to fund our operations and the entrance into and extension of agreements for product development and commercialization, where appropriate.

We expect net sales to increase in 2008 due to increased sales to China. Primarily due to the level of research and development activities and other operations, we expect a net loss and a reduction in cash, cash
equivalents and short-term investments for 2008. We believe we will need to raise additional capital in 2008 to fund our operations, including anticipated clinical trials, beyond the first quarter of 2009. We are exploring various alternatives for
financing in addition to sales of equity of SciClone, including a line of credit, debt financing and financing of our Chinese operations either through debt, equity or joint venture transactions, but we have not determined the timing or structure of
any transaction.

Our operating results may fluctuate from quarter to quarter and these fluctuations may be substantial as a result of,
among other factors, the number, timing, costs and results of pre-clinical and clinical trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, and the timing of orders for ZADAXIN from international
markets, particularly China, the regulatory approval process, the timing of FDA or international regulatory approvals, and the acquisition of additional product rights and the funding, if any, provided as a result of corporate partnering
arrangements.

Overview

FACE="Times New Roman" SIZE="2">SciClone Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the development and commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in theareas of cancer and viral infectious diseases, and to develop them for commercialization in the major pharmaceutical markets with a particular focus on China, one of the worlds fastest growing pharmaceutical markets. ZADAXINFACE="Times New Roman" SIZE="1">®, our brand of thymalfasin, is one of the largest imported drugs, as measured by revenue, in China today, and currently is in late-stage clinical development for the treatment of malignantmelanoma and hepatitis C virus (HCV). Our proprietary in-licensed compound SCV-07 entered phase 2 clinical development for viral infectious disease in June 2007. We also submitted a regulatory application to the Chinese State Food and DrugAdministration (SFDA) in December 2006 related to DC Bead, a product for the treatment of liver cancer, or hepatocellular carcinoma (HCC), for which we obtained Chinese marketing rights in June 2006.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">On April 26, 2007, we announced that we had acquired the exclusive rights in the United States and Canada to develop and commercialize RP101, aclinical-stage compound for the treatment of cancer. Under the terms of the agreements with Resistys, Inc., a wholly-owned subsidiary of Avantogen Oncology, Inc., and with RESprotect GmbH, we paid approximately $1,700,000 in upfront fees, and in thefirst quarter of 2008 a $1,320,000 milestone payment upon dosage of the first patient in a phase 2 clinical trial. In addition, we may be obligated to pay post phase 3 success-based regulatory and commercial payments up to $22,000,000, and royaltieson future sales. We intend to initially develop RP101 for the treatment of pancreatic cancer in a combination therapy with gemcitabine, the standard of care for pancreatic cancer therapy.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">In addition to our current product portfolio, we believe we are well-positioned to in-license additional therapeutics for both China and thesignificantly larger U.S. and European markets, in part because of our opportunity to develop and commercialize such products in China. Also, we intend to use our clinical work in China to support and accelerate regulatory applications in the UnitedStates and Europe.

In June 2007, we reported positive survival data from a phase 2trial, also conducted by Sigma-Tau, treating patients with stage IV malignant melanoma indicating that thymalfasin in combination with dacarbazine (DTIC) chemotherapy tripled the overall response rate and extended overall survival by nearly 3 monthscompared to malignant melanoma patients treated with DTIC, the current standard of care, and interferon alpha. In collaboration with Sigma-Tau, in October 2007, we shared the melanoma clinical data with and received approval from, the United StatesFederal Food and Drug Administration (FDA) to initiate phase 3 registration trials. We and Sigma-Tau are planning the design of a phase 3 melanoma trial and our regulatory strategy including a Special Protocol Assessment (SPA) to be filed with theFDA. Thymalfasin phase 3 clinical development and commercialization plans for HCV and melanoma have potentially significantly different timelines, costs, and sizes of prospective addressable markets, and the markets for these two products differ interms of competitive products and other factors. Consequently, before proceeding with a further melanoma trial,

we and Sigma-Tau will review the final results for the current HCV clinical trial anticipated in the third quarter of 2008 in order to determine the nextsteps for an optimal thymalfasin development program for the HCV and malignant melanoma indications.

We manufacture ZADAXIN for sale andfor our clinical trials, through third party contract manufacturers, and we conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">As of December 31, 2007, we have an accumulated deficit of approximately $169,000,000. At least over the next few years, we expect net losses due toincreased operating expenses as we expand our research and development and clinical testing efforts and our sales and marketing capabilities. Our ability to achieve and sustain operating profitability is dependent on expansion of sales of ZADAXINand securing regulatory approval for DC Bead in China, the execution and successful completion of ZADAXIN, SCV-07, and RP101 clinical trials and securing regulatory approvals for these products in the major pharmaceutical markets of the UnitedStates, Europe and Japan. If regulatory approval is secured in those territories, our ability to achieve and sustain operating profitability will depend on the successful commercialization and marketing of these products. Clinical developmentinvolves numerous risks and uncertainties and, in addition to our successes, we have experienced setbacks in clinical development in the past. In particular, in December 2005 and June 2006, we reported results from our two U.S. phase 3 trialsevaluating the double therapy combination of ZADAXIN and pegylated interferon alpha to treat HCV patients who had failed previous therapy. The results from these trials did not demonstrate that ZADAXIN in combination with pegylated interferon alphaprovides a statistically significant clinical benefit when compared with pegylated interferon alpha alone. In addition, other factors may also impact our ability to achieve and sustain operating profitability, including the pricing of ZADAXIN andits manufacturing and marketing costs, our ability to compete in pharmaceutical markets, the cost of product development and commercialization programs including SCV-07, DC Bead, and RP101, the timing and costs of acquiring rights to additionaldrugs, our ability to fund our operations and the entrance into and extension of agreements for product development and commercialization, where appropriate.

FACE="Times New Roman" SIZE="2">We expect net sales to increase in 2008 due to increased sales to China. Primarily due to the level of research and development activities and other operations, we expect a net loss and a reduction in cash, cashequivalents and short-term investments for 2008. We believe we will need to raise additional capital in 2008 to fund our operations, including anticipated clinical trials, beyond the first quarter of 2009. We are exploring various alternatives forfinancing in addition to sales of equity of SciClone, including a line of credit, debt financing and financing of our Chinese operations either through debt, equity or joint venture transactions, but we have not determined the timing or structure ofany transaction.

Our operating results may fluctuate from quarter to quarter and these fluctuations may be substantial as a result of,among other factors, the number, timing, costs and results of pre-clinical and clinical trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, and the timing of orders for ZADAXIN from internationalmarkets, particularly China, the regulatory approval process, the timing of FDA or international regulatory approvals, and the acquisition of additional product rights and the funding, if any, provided as a result of corporate partneringarrangements.

We are a biopharmaceutical company engaged in the development and commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in the areas of cancer and viral infectious diseases, and
to develop them for commercialization in the major pharmaceutical markets with a particular focus on China, one of the worlds fastest growing pharmaceutical markets. ZADAXIN, our brand of thymalfasin, is one of the largest selling imported
drugs in China today, and currently is in late-stage clinical development in Europe for the treatment of malignant melanoma and hepatitis C virus (HCV). Our proprietary compound SCV-07 entered phase 2 clinical development for viral infectious
disease in June 2007. We also submitted a regulatory application to the Chinese State Food and Drug Administration (SFDA) in December 2006 related to DC Bead, a product for the treatment of liver cancer, or hepatocellular carcinoma (HCC), for
which we obtained Chinese marketing rights in June 2006.

On April 26, 2007, we announced that we had acquired the exclusive rights in
the United States and Canada to develop and commercialize RP101, a clinical-stage compound for the treatment of cancer. Under the terms of the agreements with Resistys, Inc., a wholly-owned subsidiary of Avantogen Oncology, Inc., and with RESprotect
GmbH, we paid approximately $1,700,000 in up front fees, and will pay a $1,300,000 milestone payment upon initiation of a phase 2 clinical trial, post phase 3 success-based regulatory and commercial payments up to $22,000,000, and royalties on
future sales. We expect to initiate phase 2 clinical development for RP101 in the fourth quarter of 2007. We intend to initially develop RP101 for the treatment of pancreatic cancer in a combination therapy with gemcitabine, the standard of care for
pancreatic cancer therapy.

In addition to our current product portfolio, we believe we are well-positioned to in-license additional
therapeutics for both China and potentially the significantly larger U.S. and European markets, in part because of our opportunity to develop and commercialize such products in China. Also, we intend to use our clinical work in China to support and
accelerate regulatory applications in the United States and Europe.

Our European partner, Sigma-Tau, is conducting a triple therapy
combination (ZADAXIN plus pegylated interferon alpha and ribavirin) hepatitis C clinical trial in Europe and enrollment for this trial was completed in December 2006. We expect the results of the trial in the second half of 2008. In June 2007, we
reported positive survival data from a phase 2 trial, also conducted by Sigma-Tau, treating patients with stage IV malignant melanoma indicating that thymalfasin in combination with dacarbazine (DTIC) chemotherapy tripled the overall response rate
and extended overall survival by nearly 3 months compared to malignant melanoma patients treated with DTIC, the current standard of care, and interferon alpha. In collaboration with Sigma-Tau, in October 2007, we shared the melanoma clinical data
with and received approval from, the United States Federal Food and Drug Administration (FDA) to initiate phase 3 registration trials. We also intend to approach the FDAs European equivalent, the EMEA, to discuss our plans to initiate phase 3
registration trials.

We manufacture ZADAXIN for sale, and for our clinical trials, through third party contract manufacturers, and we
conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and universities.

From commencement of operations through September 30, 2007, we have an accumulated deficit of
approximately $165,000,000. At least over the next few years, we expect net losses due to increased operating expenses as we expand our research and development and clinical testing efforts and our sales and marketing capabilities. Our ability to
achieve and sustain operating profitability is dependent on expansion of sales of ZADAXIN and securing regulatory approval for DC Bead in China, the execution and successful completion of ZADAXIN, SCV-07, and RP101 clinical trials and securing
regulatory approvals for these products in the major pharmaceutical markets of the United States, Europe and Japan. If regulatory approval is secured in those territories, our ability to achieve and sustain operating profitability will depend on the
successful commercialization and marketing of these products. Clinical development involves numerous risks and uncertainties and, in addition to our successes, we have experienced setbacks in clinical development in the past. In particular, in
December 2005 and June 2006, we reported results from our two U.S. phase 3 trials evaluating the double therapy combination of ZADAXIN and pegylated interferon alpha to treat HCV patients who had failed previous therapy. The results from these
trials did not demonstrate that ZADAXIN in combination with pegylated interferon alpha provides a statistically significant clinical benefit when compared with pegylated interferon alpha alone. In addition, other factors may also impact our ability
to achieve and sustain operating profitability, including the pricing of ZADAXIN and its manufacturing and marketing costs, our ability to compete in pharmaceutical markets, the cost of product development and commercialization programs including
SCV-07, DC Bead, and RP101, the timing and costs of acquiring rights to additional drugs, our ability to fund our operations and the entrance into and extension of agreements for product development and commercialization, where appropriate.

We expect net sales to increase in 2007 due to increased sales to China. Primarily due to the level of research and development activities
and other operations, we are expecting a net loss for 2007 and a reduction in cash, cash equivalents and short-term investments as of December 31, 2007.

Our operating results may fluctuate from quarter to quarter and these fluctuations may be substantial as a result of, among other factors, the number, timing, costs and results of pre-clinical and clinical trials of
our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, and the timing of orders for ZADAXIN from international markets, particularly China, the regulatory approval process, the timing of FDA or international
regulatory approvals, and the acquisition of additional product rights and the funding, if any, provided as a result of corporate partnering arrangements.

We are a biopharmaceutical company engaged in the development and commercialization of novel therapeutics to treat life-threatening diseases. Our strategy is to in-license products in the areas of cancer and viral infectious diseases, and
to develop them for commercialization in the major pharmaceutical markets with a particular focus on China, one of the worlds fastest growing pharmaceutical markets. ZADAXIN, our brand of thymalfasin, is one of the largest selling imported
drugs in China today, and currently is in late-stage clinical development in Europe for the treatment of malignant melanoma and hepatitis C virus (HCV). Our proprietary compound SCV-07 entered phase 2 clinical development for viral infectious
disease in June 2007. We also submitted a regulatory application to the Chinese State Food and Drug Administration (SFDA) in December 2006 related to DC Bead, a product for the treatment of liver cancer, or hepatocellular carcinoma (HCC), for
which we obtained Chinese marketing rights in June 2006.

On April 26, 2007, we announced that we had acquired the exclusive rights in
the United States and Canada to develop and commercialize RP101, a clinical-stage compound for the treatment of cancer. Under the terms of the agreements with Resistys, Inc., a wholly-owned subsidiary of Avantogen Oncology, Inc., and with RESprotect
GmbH, we paid approximately $1,700,000 in up front fees, and will pay a $1,300,000 milestone payment upon initiation of a phase 2 clinical trial, post phase 3 success-based regulatory and commercial payments up to $22,000,000, and royalties on
future sales. We expect to initiate phase 2 clinical development for RP101 in the fourth quarter of 2007. We intend to initially develop RP101 for the treatment of pancreatic cancer in a combination therapy with gemcitabine, the standard of care for
pancreatic cancer therapy.

In addition to our current product portfolio, we believe we are well-positioned to in-license additional
therapeutics for both China and potentially the significantly larger U.S. and European markets, in part because of our ability to rapidly and cost-effectively develop and commercialize these products in China. Also, we intend to use this clinical
work to support and accelerate regulatory applications in the United States and Europe.

Our European partner, Sigma-Tau, is conducting a
triple therapy combination (ZADAXIN plus pegylated interferon alpha and ribavirin) hepatitis C clinical trial in Europe and enrollment for this trial was completed in December 2006. In June 2007, we reported positive survival data from a phase 2
trial, also conducted by Sigma-Tau, treating patients with stage IV malignant melanoma indicating that thymalfasin in combination with dacarbazine (DTIC) chemotherapy tripled the overall response rate and extended overall survival by nearly 3 months
compared to malignant melanoma patients treated with DTIC, the current standard of care, and interferon alpha. In collaboration with Sigma-Tau, we intend to approach the United States Federal Food and Drug Administration (FDA) and its European
equivalent the EMEA to share the melanoma clinical data and to discuss our plans to initiate phase 3 registration trials.

We manufacture
ZADAXIN for sale, and for our clinical trials, through third party contract manufacturers, and we conduct our research and development efforts principally through arrangements with clinical research sites, contract research organizations and
universities.

From commencement of operations through June 30, 2007, we have an accumulated deficit of approximately $162,000,000. At
least over the next few years, we expect net losses due to increased operating expenses as we expand our research and development and clinical testing efforts and our sales and marketing capabilities. Our ability to achieve and sustain operating
profitability is

dependent on expansion of sales of ZADAXIN and securing regulatory approval for DC Bead in China, the execution and successful completion of ZADAXIN, SCV-07,
and RP101 clinical trials and securing regulatory approvals for these products in the major pharmaceutical markets of the United States, Europe and Japan. If regulatory approval is secured in those territories, our ability to achieve and sustain
operating profitability will depend on the successful commercialization and marketing of these products. Clinical development involves numerous risks and uncertainties and, in addition to our successes, we have experienced setbacks in clinical
development in the past. In particular, in December 2005 and June 2006, we reported results from our two U.S. phase 3 trials evaluating the double therapy combination of ZADAXIN and pegylated interferon alpha to treat HCV patients who had failed
previous therapy. The results from these trials did not demonstrate that ZADAXIN in combination with pegylated interferon alpha provides a statistically significant clinical benefit when compared with pegylated interferon alpha alone. In addition,
other factors may also impact our ability to achieve and sustain operating profitability, including the pricing of ZADAXIN and its manufacturing and marketing costs, our ability to compete in pharmaceutical markets, the cost of product development
and commercialization programs including SCV-07, DC Bead, and RP101, the timing and costs of acquiring rights to additional drugs, our ability to fund our operations and the entrance into and extension of agreements for product development and
commercialization, where appropriate.

We expect net sales to increase in 2007 due to increased sales to China. Primarily due to the level
of research and development activities and other operations, we are expecting a net loss for 2007 and a reduction in cash, cash equivalents and short-term investments as of December 31, 2007.

Our operating results may fluctuate from quarter to quarter and these fluctuations may be substantial as a result of, among other factors, the number,
timing, costs and results of preclinical and clinical trials of our products, market acceptance of ZADAXIN, and potentially of SCV-07, DC Bead, and RP101, and the timing of orders for ZADAXIN from international markets, particularly China, the
regulatory approval process, the timing of FDA or international regulatory approvals, and the acquisition of additional product rights and the funding, if any, provided as a result of corporate partnering arrangements.